“High profitability of business, growing volumes and customer base” – The BRE Bank Group in Q1-3 2008.

“High profitability of business, growing volumes and customer base” – The BRE Bank Group in Q1-3 2008.

The BRE Bank Group generated a profit before tax of PLN 981.2 million (PLN 842.8 million net) at the end of September 2008, up by 30.9% year on year. The ROE before tax was 39.9% (37.8% in 2007).

“Today we can speak of very good financial and business results of Q1-3 2008. We expected to present our new mid-term strategy 2009-2011 at the time of this publication, but due to the current market conditions this will not be possible,” said Mariusz Grendowicz, CEO of BRE Bank. “Every strategy is based on many economic assumptions. Now that the conditions are changing so dynamically, we would have to present a document without binding assumptions. I expect that the macroeconomic environment will soon stabilise so we will be in a position to present a strategy updated with the new factors,” he added.

The main drivers of the financial results of Q1-3 2008 included:Continued growth of the loans portfolio and customers’ deposits, which was decisive to improvement of the balance-sheet structure in terms of the profitability of business. The loans portfolio grew by 37.3% (around PLN 11.8 billion) year on year, and its percentage share in the balance sheet total grew to 64.1% at the end of September 2008.Deteriorating financial market situation in Q2 and Q3 2008, resulting among others in falling prices of securities and consequently falling income on the valuation of securities recorded under other trading income. Continued significant contribution of the subsidiaries to the Group’s results. The accounting profit before tax generated by the Group subsidiaries totalled PLN 191.8 million, compared to PLN 172.8 million in the same period of 2007, up by 11%.Continued high quality of the loans portfolio resulting in relatively low credit and loans impairment provisions charged to the costs of the Group, especially in the early months of he year with an upward trend in the following months.Strict cost discipline, both at the Bank and the subsidiaries.“It is key now that we monitor risks related to the volatility of the financial markets. We pay special attention to the stability of sources of funding, capital adequacy, and foreign currency lending,” said CEO Mariusz Grendowicz.

Corporations and Financial Markets

Corporations and Financial Markets (which comprises Corporates and Institutions as well as Trading and Investments) generated a profit before tax of PLN 605.9 million in Q1-3 2008, up by 34.9% or PLN 156.8 million year on year. The contribution of the Line to the Group’s profit was dominant at 61.8%. The Line reported significant growth both in assets (up by 17.3% YoY from PLN 41.3 billion to PLN 48.4 billion) and liabilities (up by 14.1% YoY from PLN 39.6 billion to PLN 45.2 billion). The dynamic growth of business was mainly driven by:High net interest income – PLN 551.7 million;Net commission income – PLN 259.4 million;FX income – PLN 308.8 million. The contribution of Corporations and Financial Markets subsidiaries to the Line’s profit remained high (30% net of one-off transactions). The largest contributions again came from BRE Leasing, BRE Bank Hipoteczny, DI BRE, and Intermarket Bank AG.  

(For detailed information see Appendix 1)

Retail Banking

The Retail Banking Line (mBank, MultiBank, Private Banking & Wealth Management) generated a profit before tax of PLN 276.2 million, up by a high 39.7% compared to PLN 197.7 million in Q1-3 2007. The contribution of the Business Line to the Group’s pre-tax profit remained stable at 26-28% in the past periods. BRE Bank had 2.41 million retail customers at the end of Q3 2008 and 2.93 million accounts (2.64 million at mBank, 0.29 million at MultiBank). The number of customers grew by 377 thousand year to date (up by 18.5%; 323 thousand at mBank, 54 thousand at MultiBank) and by 133.5 thousand in Q3 alone. The number of accounts grew by 0.5 million year to date and by 185.7 thousand in Q3 2008 alone.

The significant growth in profit was largely driven by the dynamic growth in the loans portfolio, mainly the portfolio of mortgage loans (up by 18% or PLN 2.48 billion quarter on quarter and up by 56% or PLN 5.84 billion year on year). This enabled strong growth of the net interest income and the net commission income offsetting the trend of squeezing interest margins. The net commission income was mainly driven by insurance products combined with mortgage loans (bancassurance) as well as income from the sale of investment fund products.

The Line’s net interest income (up by 54.9%) and net commission income (up by 20.7%) grew the most in the entire Group in 2008. As a result, the Line’s contribution to the Group’s total net interest and commission income grew from 38.2% in 2007 to 44.3% in 2008.

(For detailed information see Appendix 2)

Growing Pre-tax Profit of Group Subsidiaries

The contribution of Corporations and Financial Markets subsidiaries to the Line’s profit remained high at around 30% (net of one-off transactions).
The consolidated subsidiaries of the BRE Bank Group generated a profit before tax of PLN 191.8 million year to date in 2008, up by 11% year on year over PLN 172.8 million generated in 2007. The largest contributions again came from BRE Leasing, BRE Bank Hipoteczny, DI BRE, and Intermarket Bank AG.  

(For detailed information see Appendix 3)

Key Indicators

The high profitability coupled with a strict cost discipline helped to improve the profitability and effectiveness indicators year on year.
The return on equity (ROE) of the BRE Bank Group was 39.9% in Q3 2008 (compared to 37.8% a year earlier). Although the scale of business continued to grow, the strict cost discipline was maintained. The Group’s cost/income ratio (CIR) was 48.9% in Q3 2008 compared to 53.7% in Q3 2007. The CIR net of one-off transactions was 54%, ca. 3 percentage points lower than a year earlier. The capital adequacy ratio (CAR) was 10.51% at the end of September 2008, compared to 10.26% at the end of September 2007 and 9.23% at the end of June 2008. 
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appendix-3-bre-bank-group-strategic-subsidiaries (1).doc

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appendix-1-corporations-and-financial-markets.doc

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appendix-2-retail-banking (2).doc

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